Rating – Non-domestic rates – Hereditament – Office building occupied by “property guardians” under licence while awaiting redevelopment – Each having own allocated room with overspill space and use of shared facilities – Valuation Tribunal for England dismissing appeals by appellant building owner against respondent valuation officer’s refusal to alter 2010 non-domestic rating list in light of guardianship arrangements – Appellant appealing – Whether appellant in paramount occupation of whole building as single hereditament – Appeal allowed
Until its demolition in 2018, Ludgate House was an office building of 173,633 sq ft at the southern end of Blackfriars Bridge in the London Borough of Southwark. Between 1 July 2015 and May 2017, it was occupied by a number of licensees under arrangements made between the appellant owner of the building and a property services company (VPS) which specialised in the supply of “property guardians”.
Property guardians were private individuals who, usually with others, occupied vacant premises as their residence under a temporary contractual licence until the building owner required it for redevelopment. The guardian was provided with accommodation at a lower cost than a conventional residential letting, the supplier received a fee for making the arrangements and the building owner had some protection against squatters and the prospect of mitigating liability for non-domestic rates.
The first respondent valuation officer refused the appellant’s request to alter the 2010 non-domestic rating list in light of the guardianship arrangements on the basis that the whole building was now in domestic use. The Valuation Tribunal for England (VTE) dismissed the appellant’s appeal. The VTE concluded that Ludgate House was a wholly non-domestic building with effect from 1 July 2015. Whilst the guardians were physically present, their occupation was under the control of, and on behalf of, the appellant. The appellant was in fact in paramount occupation of the whole of the building as a single hereditament. VPS was specifically engaged to provide security services, and grant licences in order to do that, but was not given possession or occupation of the premises, and the guardians were not granted exclusive occupation of any part. Accordingly, the appellant was in rateable occupation of the whole building as a single hereditament.
The appellant appealed. The second respondent was the local billing authority. The main issue concerned the effect of the arrangements implemented from 1 July 2015 on the appellant’s status as the rateable occupier of the whole building.
Held: The appeal was allowed.
(1) The primary test for identifying a hereditament was geographical and depended simply on whether the premises said to constitute a hereditament constituted a single unit on a plan: see Woolway (VO) v Mazars [2015] EGLR 56. In the present case, the geographical test set out in Mazars was satisfied. Each of the first four settlers in the building occupied a specific room, the location of which was shown on a plan. The individual room which they occupied was never in doubt, and it was kept under lock and key by them and recorded in the official VPS register as theirs. Although the licensees also had the right to use communal facilities, including washing and cooking facilities, without which it would not have been possible for them to reside in the building, that did not compromise the identification of the space which each occupied as their own and in practice did not share. A domestic hereditament need not contain all of the attributes of a separate dwelling for the occupier to be liable to council tax. Therefore, on 1 July 2015 there were four sufficiently distinct units of occupation capable of being recognised as separate hereditaments. The relevant question was who was in paramount occupation of the four individual rooms.
(2) The first of the necessary ingredients of rateable occupation was that there had to be actual occupation. That requirement was clearly satisfied. The four individual licensees were physically present and occupied the rooms they selected on 1 July 2015 for the next 22 months. Actual occupation was established by the agreed facts and by the photographic and documentary evidence taken as a whole. The licensees were in no contractual relationship with the appellant. They provided no service to it, other than as a by-product of their residence, and they could not be removed from the building except on notice given by VPS. To be rateable, occupation had to be “exclusive for the particular purposes of the possessor”. From the perspective of the licensees themselves, the purpose of their occupation was to provide themselves with somewhere to live. Their occupation for that purpose was exclusive as no other person was entitled to use the individual rooms allocated to each licensee for the same or any other purpose. The occupation of the individual rooms was obviously of benefit to the licensees, and it was not transient, but endured for a period of 22 months. Therefore, all four markers of rateable occupation were exhibited by the licensees: John Laing & Sons Ltd v Kingswood Assessment Committee [1949] 1 KB 344 applied.
(3) Although the building as a whole was not wholly used for the purposes of living accommodation, the individual rooms occupied by the licensees had no separate or concurrent use other than as living accommodation. The motive of rates mitigation was not a purpose of anyone’s occupation (although it might have been a consequence of it). There was no evidence from which general control by the appellant of the individual rooms could be discerned.
(4) The tribunal was satisfied that the licensees’ individual rooms were separate hereditaments; and that the rateable occupier of each of those hereditaments was the individual licensee whose temporary home it was. The rooms were used wholly for the purpose of living accommodation and the licensees were therefore not liable for non-domestic rates, but for council tax. Ludgate House was not a composite hereditament, because there was no single rateable occupier of the domestic and non-domestic space. As there was more than one hereditament, the respondent’s unilateral notices, issued on the basis that there was a single composite hereditament, could not be supported. The 2010 non-domestic rating list should therefore be restored to the state it was in before the unilateral notices, omitting Ludgate House from the list altogether.
David Forsdick QC and Luke Wilcox (instructed by Herbert Smith Freehills LLP) appeared for the appellant; Mark Westmoreland Smith (instructed by HMRC solicitor’s office) appeared for the first respondent; Richard Clayton QC and Faisel Sadiq (instructed by Southwark London Borough Council) appeared for the second respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Ludgate House Ltd v Ricketts (VO) and another
